Korea Federation of SMEs Proposes Improvements to Employment Retention Subsidy System

Due to the aftermath of the novel coronavirus infection (COVID-19) and the ongoing economic downturn, shops on the shopping street in front of Ewha Womans University in Seodaemun-gu, Seoul, were empty on the 18th of last month. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Moon Hyewon] The Korea Federation of Small and Medium Business (Kbiz) announced on the 6th that it has proposed to the Ministry of Employment and Labor the need to improve the Employment Retention Subsidy system as the management conditions and payment capabilities of small and medium enterprises are gradually deteriorating due to the resurgence of the novel coronavirus infection (COVID-19).

According to Kbiz, many companies that implemented employment retention measures earlier this year are facing a situation where they will no longer be able to receive subsidies soon due to the annual 180-day support period limit despite the prolonged COVID-19 pandemic. Kbiz argues that the support period limit should be extended so that companies can continue to receive support until the end of this year.

Joo Bowon, co-chairman of the Labor and Workforce Committee of Kbiz and chairman of the Korea Metal Heat Treatment Industry Cooperative, expressed difficulties, saying, “Currently, many small and medium enterprises are barely able to cover labor costs with the Employment Retention Subsidy as their payment capacity is almost nonexistent. The support period limit will be reached by the end of this month, and after that, there is no immediate alternative, so they have to consider workforce reduction.”

It was explained that if the special support period, which covers up to 90% of leave and furlough allowances, ends and the support rate returns to the existing 67% after this month, the labor cost burden for small and micro enterprises whose payment capacity has not yet recovered will become even heavier.

Kim Ki-moon, chairman of Kbiz, emphasized, “As the employment crisis caused by COVID-19 continues, the system must be improved as soon as possible so that small and medium enterprises can overcome the crisis together with workers through continuous Employment Retention Subsidies. Securing the related budget is essential for improving the Employment Retention Subsidy system, so active cooperation among related ministries, including the Ministry of Economy and Finance, must be ensured.”

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